Simply stated, liquidity (or a lack thereof) is what keeps the markets from crashing.
Without liquidity you can’t sell your, bonds, ETF’s, or mutual funds regardless of what the titans on Wall Street tell you.
In fact, the titans themselves already have protection measures in place (approved by their bought-and-paid-for government agencies) to freeze your accounts during a panic selling market.
When it happens the boyz in the “Club” will tell you: “Although there is enough liquidity to pay investors back, such actions would lead to a disproportional shift in our portfolio’s composition, which could compromise the interests of remaining investors.”
What a bunch of BS.
In Plain English it means…Fire sale.
It also ties in with the fact that there is a global shortage of dollars which makes liquidity a bigger threat to your investments.
You see, fund managers have handcuffed themselves by their own greed. They make enormous fees based on the size of their portfolios. The bigger the fund, the bigger their fees.
It’s that simple.
However, if you’re a fund manager with 9,567,000 shares of Apple, Google, Amazon, Netflix, etc., you can’t just unload those shares on the market without causing it to drop substantially in price.
On the flip side, a small investor can dump 500 shares during a liquidity crisis and minimize your losses.
Last year, we explained the perils of limited liquidity and how it affects your portfolio. (Current subscribers can see it HERE…if you’re not a current subscriber then go HERE).
In November we’ll focus on the best way to avoid the (il)liquidity trap that Wall Street plans to unleash soon.
Get your copy by following the link below.
And share this with a friend who you know owns mutual funds…They’ll thank you later.